Yes, quite the "progressive," that Hoover. I was reading a piece a few weeks ago that estimated that Hoover's "progressive" response was worth $22 billion in today's dollars. Yeah, that's quite the stimulus!
Deflation in the 1930s occurred because asset prices went too high then collapsed. Asset prices went too high because there was too much liquidity and debt in the financial system - sounds familiar, doesn't it? Then, the Fed exacerbated the deflation by keeping interest rates too high and removed banking reserves from the financial system. This is what caused The Depression.
Do you know who made this conclusion?
Milton Friedman.
Deflation wasn't because of FDR's progressive policies. That's a bizarre conclusion. Say what you want about government spending but it certainly is not deflationary when there is an output gap.
And again, as any macro 101 student today knows, labor cost curves are inelastic. This seems to escape the fringe revisionists who blame the Depression on FDR.
If those asset prices were inflated because of too much liquidity, like you said, then the drop in asset prices is a correction that has to occur. It can not be delayed, nor reduced, nor postponed. Trying to intervene in that correction is very much the cause of the problem that exacerbated the recession of 1929 into a Depression. And that's exactly what Hoover tried to do. He had destroyed crops and animals in attempt to prop up those corrected asset prices:
According to Murray Rothbard's excellent book on the Great Depression (book):
President Hoover began to pursue the inexorable logic of government intervention to the next step: recommending that productive land be withdrawn from cultivation, that crops be plowed under, and that immature farm animals be slaughtered—all to reduce the very surpluses that government’s prior intervention had brought into being.
This intervention in the market, along with attempts to prop up wages, were precisely what exacerbated the recession into a Depression. Hoover was the one that started all this interventionism, and FDR merely followed suit with dramatically more of it. So yes, it's probably unfair to blame FDR for the Depression entirely; Hoover gets a good bit of the blame, too. But the lesson that should be learned is that trying to prop up prices, rather they be crops, assets, stocks, or homes (like we're currently doing) is very harmful. And it's impossible, and in fact counterproductive, for the government to try to create jobs and prosperity.
Lew Rockwell's excellent article: Recession or Depression? - Llewellyn H. Rockwell, Jr. - Mises Institute
Another excellent article from Rothbard on the Depression: Hoover's Attack on Laissez-Faire - Murray N. Rothbard - Mises Institute
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